Foreign Scammers Targeting U.S. Companies Stopped by FTC

In an action brought by the Federal Trade Commission, a federal court has banned a Slovakia-based operation from the online directory business and entered a $9 million judgment against them.

“The last thing small business owners need is someone trying to trick them out of their hard-earned money,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “The FTC is committed to taking action against this kind of deceptive scheme.”

In March 2013, the FTC charged Wolfgang Valvoda, Susanne Anhorn, and Construct Data Publishers a.s., also doing business as Fair Guide, with tricking small businesses and non-profits into paying millions of dollars to be listed in an online directory they did not want to be listed in, and for which they did not realize they would be charged.

As the FTC alleged in its complaint, the defendants sent mailings to small retailers, home-based businesses, local associations, and others who host exhibits at trade shows. The mailings were falsely linked to a trade show the recipients had attended or planned to attend, to trick them into thinking they had a preexisting business relationship with the defendants.

The enclosed cover letter and form falsely suggested that the recipients needed to confirm or update their contact information for the trade show. Many did not notice a statement, buried in fine print at the bottom of the form, that by signing and returning the form they were agreeing to pay $1,717 annually to Construct Data Publishers, a company with no connection to trade shows, for a listing on its website, fairguide.com.

The defendants disguised their true location in Slovakia by hiring a company in Naperville, Illinois, to print and mail the cover letters and forms. The mailings included a pre-paid return envelope addressed to a Chicago-area P.O. Box. After delivery to the P.O. Box, the mail was forwarded to the defendants in Slovakia. The defendants then sent out invoices demanding payment of $1,717 or more from each business or non-profit that had returned a signed form. The invoices instructed recipients to wire payment to a Slovakian bank account. Those who refused to pay were threatened with extra charges, damage to their credit, and lawsuits. Many paid just to end the harassment.

The FTC filed its complaint in the U.S. District Court for the Northern District of Illinois, Eastern Division, charging that the defendants’ deceptive conduct violated the FTC Act. The court issued a temporary restraining order followed by a preliminary injunction prohibiting the fraud and freezing the defendants’ assets pending litigation. On February 11, 2014, the court entered a default judgment and permanent injunction against the defendants.

In addition to banning the defendants from selling online directories and directory listings, the court order announced today prohibits them from misrepresenting material facts about any products and services, selling or otherwise benefitting from customers’ personal information, failing to properly dispose of customer information, and collecting money from customers. The court also entered a $9.1 million judgment against defendants based on the consumer losses caused by the scheme.

The court’s order is the latest in a series of actions taken against Construct Data/Fair Guide. Courts in Germany and Italy also have entered orders against the company for its deceptive practices. In 2007, to settle a lawsuit filed by an Austrian trade association, Construct Data agreed to cease its deceptive solicitations in Europe. The following year, however, Construct Data moved from Austria to Slovakia and continued its scheme, targeting businesses and non-profits in the United States and other countries.

The FTC appreciates the assistance of the Ministry of Justice of the Republic of Slovakia, the Slovak Police Attache, and the Ministry of Justice of Austria in bringing this case.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

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